1. Not Conducting Proper Market Research
Incorporating a company, business or organisation in Saudi Arabia requires a project manager’s eye to cut through layers to analyse the market demand and discover potential clients willing to buy the goods or services offered. It helps the business determine whether there is demand in the market for the goods or services it provides, and how the business should position itself to meet the market demand. Businesses will also need to research and understand local laws to ensure that they can legitimately operate in the country.
2. Choosing the Wrong Business Structure
Having an inappropriate company structure can really cause serious legal and financial headaches and slow down the growth of the company. There are a few things to consider before deciding on a track that involves the nature of the business, the number of owners/partners, and the purpose of liability management. Choosing the correct form of business structure has a number of advantages, including tax savings and legal limitations, so it is easier to do business in Saudi Arabia.
3. Failing to Obtain the Necessary Licenses and Permits
When starting a business in Saudi Arabia, you must acquire all the required permits and licenses. If you do not, significant penalties and legal consequences may follow. Businesses must ensure that they get the required permits or licenses from many authorities, including the Ministry of Commerce and Investment, the Saudi Arabian General Investment Authority, and the Chamber of Commerce. It is advisable to obtain legal advice to ensure that your permits and licenses have been obtained and are consistent with your local laws.
4. Ignoring Tax Regulations
In Saudi Arabia, businesses face legal consequences for flouting tax regulations. Companies must ensure that they comply with tax regulations, including VAT registration and payment of the applicable taxes. Companies may face significant fines for violations of the regulations, as well as risks to their reputation or a combination of both. Choosing the correct form of business structure has a number of advantages, including tax savings and legal limitations, so it is easier to do business in Saudi Arabia.
5. Not Considering the Anti-Concealment Law Requirements
Saudi Arabia imposes strict Anti-Concealment laws that prohibit companies from using illegal arrangements with sponsors or nominees. Companies that contravene these laws may also be barred from engaging their business in Saudi Arabia in the future. A contravention will also be subject to 5 years imprisonment and a fine of 5 million Saudi Riyals.
6. Not Considering Language Barriers
Arabic is the official language in Saudi Arabia, and companies are advised to overcome language barriers when engaging with local authorities and potential customers.
7. Neglecting Cultural Differences
Saudi Arabia has a unique cultural environment, and companies are advised to appreciate cultural differences when conducting business. Considerations include dress codes, business etiquette, and types of communication. Companies also need to take into account religious practices, including prayer times and fasting during Ramadan – not respecting this can easily offend potential customers or partners, with the possibility of hurting the company’s reputation.
8. Not Hiring Local Talent
Saudi Arabia also has a broad pool of skilled talent and professionals. If a company can hire their talent locally, it will assist the company in navigating its local business environment.
9. Underestimating Startup Costs
A common mistake new business owners make when starting a business in Saudi Arabia is not weighing startup costs properly, which can cause budgeting issues in the first phase of the company. These costs include, but are not limited to, office space, equipment, employee wages, marketing costs, and legal fees. This mistake can be avoided by planning and budgeting correctly. Businesses should also consider any unexpected or discretionary costs and have procedures in place to handle them. It is important to have a clear and realistic understanding of the costs involved in operating a business in Saudi Arabia.
10. Failing to Develop a Comprehensive Business Plan
Having a comprehensive business plan is vital for the success of a company. Your business plan will include financial projections, marketing strategies and operational plans. A well-drafted business plan demonstrates to potential investors that the company has a clear strategy to grow and develop the company, in particular when entering new markets.
To ensure a smooth company formation process, it is important to consider the following tips:
- Partner with an established consulting company that has development experience in Saudi Arabia.
- Obtain professional legal and accounting support to help you understand and comply with local regulations and the startup process.
- Network and connect with potential customers.
- Conduct proper due diligence before entering into any agreements with local individuals or firms.
- Prepare a business plan that includes thoughtful projections for financial considerations.
TAKEAWAY
You can rely on our team in our Corporate Structuring Department to guide you through each of the outlined steps, whether it be in deciding what type of licenses your business needs or completing all application forms for submission to the needed authorities. We will also keep you moving in the right direction and make sure your licenses are always updated and understand any implications from developing regulations and post-incorporation services.
From determining the appropriate structure for your Saudi company to preparing the appropriate documentation, to registering your office, visa services, banking support, accounting, bookkeeping, payroll, and tax services, Creation Business Consultants will assist you from the beginning to the end of the process. Reach out to a member of our Corporate Structuring team for your free expert consultation on your Saudi Arabia entity; contact [email protected], or call us in Saudi Arabia at +966 56 865 2329 or the UAE at +971 4 878 6240 today.
